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While I was right about the down move (see previous post "Kiss of Death"), the sad thing is that I did not fully capitalise on it. When I first began to trade options many years ago, I remember an often-asked question : "Would you want to be right or would you want to make money?" To many being right and making money are both the same thing. Well, not quite true. Being right answers to yourself and specifically to your ego. Being profitable answers to your bank (or trading) account. We know traders who are right less than half the time and yet very profitable. Conversely, we come across those that are right most of the time, but lose money.

When the SPX broke the rising wedge, I was aware that probability was high that a down move would result. After the breach, the index consolidated beneath the rising wedge and above the 30 day MA. In the process, it visited 1300 twice. While at 1300, VIX hovered below 20. My point is that it was a great time to close out our September Bull Put Spreads which were trading around $0.30 - $0.40. Instead, we did nothing. Yesterday, that omission came back to haunt us, by rising to over $2.10 per contract. While delta was manageable at 13, it remains a threat. To think that I even mentioned closing it in an earlier post (see post "September Iron Condor Update"). I quote myself : "However, our bearish view of the market may make us close this out earlier than 0.20"

So where do we go from here?

We expect some retracement before the bears mount another assault. Yesterday was a reversal day which may bring the SPX up to the 1260 - 1263 area. A 50% retracement will see resistance at 1283 area. We will likely increase our Bear Call Spreads then.

Next post, we’ll talk about our October iron condor position that has already been opened. For those following closely, we opened the Bear Call Spread at 1385/1410 when SPX was at 1272 (credit $1.70) and the Bull Put Spread at 1075/1050 yesterday (credit $1.45).

More details and risk profile soon.

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